Wesco Incorporated's only product is a combination fertilizer/weedkiller called GrowNWeed. GrowNWeed is sold nationwide to retail nurseries and garden stores. Zwinger Nursery plans to sell a similar fertilizer/weedkiller compound through its regional nursery chain under its own private label. Zwinger does not have manufacturing facilities of its own, so it has asked Wesco and several other companies) to submit a bid for manufacturing and delivering a 26,000-pound order of the private brand compound to Zwinger. While the chemical composition of the Zwinger compound differs from that of GrowNWeed, the manufacturing processes are very similar The Zwinger compound would be produced in 1,000-pound lots. Each lot would require 31 direct labor hours and the following chemicals: Chemicals AG-5 KL-2 CW-7 DF-6 Quantity in Pounds 330 280 170 220 The first three chemicals (AG-5, KL-2, and CW-7) are all used in the production of GrowNWeed. DF-6 was used in another compound that Wesco discontinued several months ago. The supply of DF-6 that Wesco had on hand when the other compound was discontinued was not discarded. Wesco could sell its supply of DF-6 at the prevailing market price less S0.12 per pound selling and handling expenses. Wesco also has on hand a chemical called BH-3, which was manufactured for use in another product that is no longer produced. BH-3, which cannot be used in GrowNWeed, can be substituted for AG-5 on a one- for-one basis without affecting the quality of the Zwinger compound. The BH-3 in inventory has a salvage value of S550 Inventory and cost data for the chemicals that can be used to produce the Zwinger compound are shown below: Actual Price per Pound When Current Market Price per Pounds in Inventory 19,000 Raw Material AG-5 KL-2 CW-7 DF-6 BH-3 7,500 4,420 6,100 S0.75 S0.43 $1.23 S0.59 S0.57 S0.85 S0.48 $1.43 S0.53 Salvage) The current direct labor wage rate is $16 per hour. The predetermined overhead rate is based on direct labor-hours (DLH). The predetermined overhead rate for the current year, based on a two-shift capacity with no overtime, is as follows: Variable manufacturing overhead Fixed manufacturing overhead S 4.10 per DLH 8.00 per DLH Combined predetermined overhead rate S 12.10 per DLH Wesco's production manager reports that the present equipment and facilities are adequate to manufacture the Zwinger compound. Therefore, the order would have no effect on total fixed manufacturing overhead costs. However, Wesco is within 500 hours of its two-shift capacity this month. Any additional hours beyond the 500 hours must be done in overtime. If need be, the Zwinger compound could be produced on regular time by shifting a portion of GrowNWeed production to overtime. Wesco's direct labor wage rate for overtime is S24 per hour. There is no allowance for any overtime premium in the predetermined overhead rate